Government warned that Rent Pressure Zone system has to change
The Housing Agency has advised the Government to change the current system of Rent Pressure Zones (RPZs), Extra.ie understands.
The agency's report is understood to have laid out several options to Minister for Housing James Browne.
They include making no changes and allowing RPZs to lapse and return to market condition at the end of the year, retaining the current 2% system, and making changes to the system. Minister for Housing, James Browne TD. Pic: Sam Boal/Collins Photo
No specific percentage increases to the current system are referenced in the report. RPZs have repeatedly been highlighted as a barrier to luring foreign capital into the struggling housing market.
The measures limit annual rent increases to 2% in designated Rent Pressure Zones. RPZs were introduced in December 2016 in a bid to curtail rapidly rising rents by capping annual rent increases at 4%. The cap was reduced to 2% in December 2021.
Mark Cassidy, Director of Financial Stability at the Central Bank, told the Oireachtas Housing Committee last week that institutional investment has declined by 80% since 2022. The Department of Finance. Pic: Gareth Chaney/Collins Photos
An analysis by the Department of Finance last year on the availability, composition and flow of finance for residential development highlighted RPZs as something institutional investors wanted dropped.
The report found € 20 billion is needed annually in order to build 50,000 homes each year, with € 16.9 billion of this coming from institutional investors who told the Government RPZs need to go if they want their capital.
The Coalition leaders, Taoiseach Micheál Martin and Tánaiste Simon Harris, last night met to discuss the range of options. It is understood Mr Browne is formulating an option not contained within the Housing Agency's report but influenced by it. Pic: Sasko Lazarov/© RollingNews.ie
One option previously floated was to allow landlords to reset rents when a tenancy ends. However, there are concerns that this could incentivise evictions.
The Cabinet committee on housing, comprised of senior ministers, will meet on Thursday to further discuss the plan ahead of a memo being brought to Cabinet in the coming weeks.
The Opposition has pledged to resist any changes to the RPZs despite the Government saying it will be conscious of renters in any changes it makes. A tax credit for renters was introduced in 2024 and provides €1,000 a year for individuals or €2,000 for jointly assessed married couples or civil partners. Eoin Ó Broin. Pic: Niall Carson/PA Wire
Sinn Féin housing spokesman Eoin Ó Broin told Extra.ie that the focus needs to be on increasing supply and not 'punishing' renters.
'Rents are too high. They cannot be allowed to increase even further,' he said. 'Any change to Rent Pressure Zones that allows landlords to hike up rents even further will do little if anything to increase new housing supply, but will impose real financial hardship on tenants.
'The Minister for Housing, James Browne, should focus on increasing the supply of social and cost-rental homes rather than punishing renters with unaffordable rents.'
A report by the Housing Commission in July of last year criticised RPZs and proposed to change them to a 'reference rent' system that pegs rent increases to nearby homes of a similar quality.
However, this option has been criticised by the Economic and Social Research Institute (ESRI), which said it had concerns around the 'practical or feasibility issues' surrounding how to calculate appropriate reference rents in different local markets.
Mr Browne is expected to unveil his new housing plan next month ahead of the Dáil's summer recess. Pressure is building on the Government to make significant intervention to stimulate housing supply in the wake of just 30,300 new homes being built last year, despite a promise that close to 40,000 would be constructed.
Mr Browne said last week that achieving the target of 41,000 new homes this year will be 'very, very difficult', with some predictions from independent agencies forecasting lower than 30,000 new homes.
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